Rent Control: What You Should Know about California's New Bill

Everyone who owns rental property in Los Angeles and throughout the state has been talking about California’s new rent control law, which went into effect January 1, 2020. The Tenant Protection Act of 2019, or AB-1482, restricts the amount that rent can be raised statewide. If you own a rental property in Los Angeles or anywhere in California, there are a few key details you will need to pay attention to when complying with this law.

Determine if the Law Applies to Your Property

Not all Los Angeles rental properties will be affected.

The age of your property matters, and so does the type of investment property it happens to be.

The new rent control law applies to any property that has not been issued a certificate of occupancy in the last 15 years. If your property was constructed 15 years ago or more, this law could apply to you. You also need to know that it’s a rolling 15 years.

The law excludes most single-family dwellings and condos unless you are a real estate corporation or a real estate investment trust. If you’re a private landlord or a single investor, your property is only affected if it’s a multi-family home or an apartment complex. Residential real estate property is identified as a residence that’s alienable separate from the title to any other dwelling unit, provided that you qualify as a corporation or an LLC. If you’re an individual investor, your single-family rental home or condo will not be subject to this law.

Generally, the law is focused on restricting rental increases on corporate-owned properties. Most individual investors are safe unless they have those older multi-family units.

Adjusting Your Lease and Informing Tenants

You need to provide notice to your tenants if the property they’re living in does not fall under this new law. You also need to incorporate changes to your lease agreement that reflect this new law or the exemption you’re claiming from it.

Understanding the California Rent Control Limits

If your investment property is subject to the new rent control law, these are the basics of how and when you can increase your rent:

  • Over the course of any 12-month period, you cannot increase the rental rate more than five percent plus the percentage change in the cost of living, or 10 percent, whichever is lower.
  • If your tenant has been in the unit for more than 12 months, the rental rate cannot be increased in more than two increments over the 12-month period.
  • When you have a vacant unit, you can set the rental rate as high as you want before those tenants take possession. But, once residency is established, the new law applies.

Just Cause Evictions and Terminating Tenancies

Just Cause Evictions and Terminating TenanciesIn the past, you weren’t required to renew a lease with your tenant. Under the new law, there is a clause that focuses on just-cause termination of tenancy. There are at-fault lease terminations or evictions and no-fault lease terminations or evictions.

An at-fault lease termination or a just cause eviction would be due to nonpayment of rent or breach of the lease agreement. No-fault lease terminations occur when an owner wants to move back into the property or has plans to demolish the property and build something else. With the no-fault termination of a lease, you will be responsible for compensating that tenant for relocation expenses which equal the amount of one month’s rent.

This is just an overview of a very complex and important California law. For more information or resources, contact our team at Bell Properties.